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MINISTRY OF TELECOMMUNICATIONS AND POSTAL SERVICES

EXPLANATORY MEMORANDUM

subject:Ratification of an Amendment to the Agreement of the International Telecommunications Satellite Organisation (ITSO) aimed at protecting the provision of satellite communication services to developing countries.

DATE:2ND JUNE 2015

1PURPOSE

For Parliament to consider the ratification of the Amendment to Article XII (c) (ii)of the ITSO Agreement, agreed at the 31st Assembly of Parties in Paris on the 20th-23rd March 2007,in terms of section 231(2) of the Constitution.

2SUMMARY

2.1 ITSO is an intergovernmental organisation that was established under Resolution 1721 (XVI) of the General Assembly of the United Nations. ITSO’s current mission is to ensure that Intelsat Ltd, a satellite operator, continues to provide public telecommunications services, including voice, data and video, on a global and non-discriminatory basis. The satellites operated by Intelsat ltd utilise the orbital locations and frequency assignments that were handed over to Intelsat by the Parties (Member States of ITSO) when Intelsat was privatised. These assets are known as the common heritage.

2.2In 2007 the 31st ITSO Assembly of partiesapproved an amendment to the ITSO agreement in order to protect the global provision of public telecommunication services on a non-discriminatory basis through their satellite assets.The amendment was a response to the realisation that whenIntelsat was privatised, the commercial risk of bankruptcy, or of Intelsat Ltd not being able to fulfil its public service obligations, had not been forseen. Without the amendment,the Parties’ Common Heritage orbital locations could be transferred to third parties, with no obligation to fulfil the existing public service obligations. The Parties’ Common Heritage ensures global coverage and direct, instant and reliable connection to countries around the world. A significant number of developing countries still depend on these services. The amendment to the ITSO Agreement requires ratification by 99 Member States.

2.3On the 13thMay 2015, Cabinet approved the submission of the Amendment to the International Telecommunications Satellite Organisation Agreement to Parliament for ratification in terms of section 231(2) of the Constitution.

3STRATEGIC FOCUS OF THE MEMORANDUM

3.1The rights acquired by ITSO at the International Telecommunication Union (ITU) for the utilisation of the orbit/spectrum resources at certain satellite positions were intended to contribute to the communication needs of the Parties and supportthe efficient, rational and equitable utilisation of radio frequency spectrum.

3.2It is important to ensure the preservation of the Common Heritage in order to advance critical social goals such as the provision of bandwidth that will enable distribution of educational content, telemedicine and other important services which will be of great benefit to communities in remote and rural areas in developingcountries. Therefore theratification of the amendment will contribute to bridging the digital divide and creating a better life for all, especially for those countries that rely on satellite services for their telecommunication and broadcasting services.

3.3 The decision of the 31stAssembly of Parties to amend the ITSO agreementaims to ensure the long-term global coverage, global connectivity, non-discriminatory access and service to countries dependent on satellite communication provided under the provisions of the ITSO Agreement. Ratification of the amendment is in line with the President’s role as Chair of the AU Presidential Infrastructure Championing Initiative, which includes providing greater access to ICTs in Africa. It is also part of South Africa’s international priorities to contribute to a better world and to the development of Africa.

4.DISCUSSION

4.1In 1964, the USA andten other countries established an international satellite organisation in response to a UN Resolution that communication by means of satellites should be available to all countries on a global and non-discriminatory basis. This was also a response to the principle embedded in the UN Outer Space Treaty, that outer space shall be used for the benefit and in the interest of all countries.

4.2INTELSAT was formed as an intergovernmental organisation owning and managing a constellation of communications satellites providing international broadcast services. In an effort to address the telecommunications divide, funds were set aside to implement an assistance and development programme for developing countries in satellite communications infrastructure.

4.3Ownership and investment in INTELSAT was distributed as shares amongst Members according to their respective use of services. INTELSAT’s primary source of revenue came from satellite usage fees. Satellite services were available to any organization (both members and non-members), and all users paid the same rates.

4.4During the late 1990s, the satellite sector was becoming increasingly competitive because of the development of private telecommunications companies. It was felt that the governing structure of INTELSAT had grown unwieldy from having too many members. It was decided to restructure INTELSAT to be able to respond to market pressures in the form of increasing competition, fast-paced innovations and rising capital costs, and in order to attract private investments whilst complying with public service obligations.

4.5In the year 2000, the General Assembly approved the legal instruments and framework necessary to create a commercial and competitive company named “Intelsat Ltd” to operate the satellite system and provide space segment capacity in a manner consistent with the Core Principles of global coverage and connection, and non-discriminatory access. Intelsat became a private company in 2001. Consequently,the Parties (Member States) transferred the global satellite system, including the geostationary orbital locations, to the privatised entity, Intelsat Ltd, which was subsequently purchased by private equity funds.

4.6In the same period, ITSO was established as a supervisory intergovernmental body, by amendment to the definitive agreement of 1973, undertaken at the Assembly of Parties in 1999 in Malaysia. ITSO was established under Resolution 1721 (XVI) of the General Assembly of the United Nations, which states “communication by means of satellite should be available to the nations of the world”. ITSO now has one hundred and forty nine (149) member countries, including South Africa. Its headquarters are in Washington D.C.

4.7The Core Principles contained in the ITSO Agreement are to:

5.6.1maintain global connectivity and global coverage;

5.6.2serve its lifeline connectivity customers; and

5.6.3provide non-discriminatory access to the Company’s system.

4.8ITSO acts as custodian of the “Common Heritage”; those frequencies and orbital locations in use by Governments at the time of privatisation. The relationship between ITSO and Intelsat Ltd is governed by the ITSO Agreement. Since the restructuring of INTELSAT into Intelsat Ltd., the Parties are no longer shareholders of Intelsat Ltd. However, the ITSO agreement spells out the legal obligations that Intelsat Ltd. has towards the Parties in return for Intelsat ltd’s use of the Parties’ Common Heritage.

4.9Intelsat ltd is now one of the two largest satellite operators in the world. However, by 2007, Intelsat ltd’s level of debthad become a major concern to ITSO. That level of debt is now approximately US$ 16 Billion. The existing agreement does not protect the Parties from the danger of the potential loss of the Common Heritage in the event of Intelsat’s possible bankruptcy. The Common Heritage currently includes 21 Orbital locations with an estimated value of US$ 2 Billion. These assets will be lost if Intelsat ltd goes into bankruptcy, and any new entity that receives these assets will have no Public Service Obligations. This situation had not been considered at the time of privatisation.

4.10In response to this potential problem, the 31stAssembly of Parties in Paris in 2007 approved, by majority of more than two-thirds of the Parties represented, an amendment to Article XII, Paragraph (c) (ii) to the ITSO Agreement. Article XII paragraph (c) (ii) of the ITSO Agreement currently provides the following:

“in the event that such use is no longer authorized, or the Company no longer requires such frequency assignment(s), cancel such frequency assignment under the procedures of the International Telecommunication Union.”

4.11The amendment adopted at the Assembly of Parties is as follows:

“In the event that the Company, or any future entity using the Common Heritage frequency assignments, waives such frequency assignment(s), uses such assignment(s) in ways other than those set forth in this Agreement, or declares bankruptcy the Notifying Administrations shall authorize the use of such frequency assignment(s) only by entities that have signed a public services agreement, which will enable ITSO to ensure that the selected entities fulfill the Core Principles.”

4.12The Amendment is meant to protect the Common Heritage of Parties in case Intelsat Ltd files for bankruptcy, or takes any other action that could jeopardise the common heritage of frequency assignments associated with particular satellite orbital locations. The Republic of South Africa supported the amendment.

4.13The Parties’ Common Heritage are those orbital locations that were acquired when Intelsat was an intergovernmental organisation, and are of critical importance to the successful fulfilment by Intelsat ltd of the Core principles of global coverage and connectivity, non-discriminatory access and service provision.

4.14Many countries are still dependent on Intelsat ltd public service agreements for their international and domestic telecommunications and broadcasting services. The recent ITSO Assembly of the Parties-35 that took place in Uganda 2012 decided that ITSO should continue to ensure the performance of Core Principles of the ITSO Agreement for the provision of international public telecommunications services, with high reliability and quality, until at least 2021. This was a success for developing countries, as other countries would seemingly prefer the Agreement to be terminated. The Uganda meeting was also used as an opportunity to highlight the urgent need for the Parties to ratify the ITSO amendment.

4.15Thirty threeAfrican countries have now ratified the ITSO amendment. Article XV of the ITSO agreement requires that the amendment must be ratified by two thirds of ITSO members (99 countries) for it to enter into force. Currently 88 countries have ratified the agreement, including eight from SADC. Many of these countries are least developed countries. The high level of ratifications is a result of strong lobbying by some African countries such as Uganda, as well as by the ITSO Secretary-General. In proposing ratification, South Africa is also responding to the international consensus that it is important to protect the Common Heritage, and because once the amendment comes into force, service providers will be able to sign new public service agreements with ITSO.

4.16Satellite coverage of South Africa is sufficient to ensure the competitive provision of satellite communication services, including by Intelsat ltd, which is active in the broadcasting sector. However, it is clear that many developing countries still depend on Intelsatpublic service agreements, including in Africa. This is because in many countries there is little coverage of their space segment by commercial satellite for the provision of communication services. Intelsat ltd is still obliged to provide coverage, although the costs are perceived to be relatively high. It is recommended that market opportunities are researched for African service providers to enter the satellite industry in developing regions around the world, especially once the ITSO agreement does lapse in 2021 or thereafter.

4.17Due consideration was given to the Government's Programme of Action and the objectives of the National Development Plan. South Africa, whilst supporting this ratification, is working on building it local skills and capabilities in ensuring that it provides reliable, affordable, efficient access to ICT infrastructure and services by 2030.

5.IMPLEMENTATION PLAN

5.1On the 13th May 2015, Cabinet approved the submission of the Amendement to the International Telecommunications Satellite Organisation Agreement to Parliament for ratification in terms of section 231(2) of the Constitution.

5.2The amendment requires ratification by 99 Member countries (two thirds of ITSO Member States) before entry into force. Currently 86 countries have sent letters of acceptance to the USA as the depository of the Agreement.

6.FINANCIAL implications

None

7.LEGAL OPINIONS OBTAINED

7.1The Agreement is attached as Annexure A together with the amended text of the Agreement Annexure B. The opinion of the Office of the Chief State Law Adviser of the Department of Justice and Constitutional Developmentisattached as Annexure C. This opinion indicates that no provision of the Amendment is inconsistent with our domestic law.

7.2The Office of the Chief State Law Adviser - International Law (Department of International Relations and Cooperation) was also consulted and the opinions are attached as Annexure D and E. These opinions indicate that the Amendment is acceptable from an international law perspective and not in conflict with any of South Africa’s international law obligations and that procedurally South Africa is in a position to ratify the Amendment.

8.recommendationS

It is recommended that Parliament ratifies the Amendment to the ITSO Agreement in terms of section 231(2) of the Constitution.